One of my best friends lives a life very similar to mine. She lives in a one bedroom apartment in Uptown Dallas; she travels extensively; she graduated from a private university about 5 years ago and is relatively successful in her career; she dines and drinks at all the trendiest places and wears designer clothes; her parents are fairly well off. There is one big difference between us though. She doesn't have any retirement investments, nor does she have much in savings. She also carries a small credit card balance from time to time.
She has been lamenting her lack of savings more and more frequently and wishing/planning to do something about it so she can buy a home one day. I recently confronted her and told her I refused to travel with her or hear about any shopping trips until she swore to me that she had paid off all her credit card debt. She appreciated my semi-tough-love advice and asked me to come over this weekend to help her set up retirement savings accounts and go over her budget.
Friend Two
Another one of my friends - a relatively new friend - also lives a similar life. Her parents are well off; she spends freely; she drives a luxury car; she earns 6 figures and is excelling in her career. And over mimosas at brunch just now she confided to me that she doesn't have a dime in savings and she gets stressed whenever anyone even talks about money. She admitted that she spends all her money on going out and often picks up the check for others and leaves huge tips for wait staff and strangers. On top of all this she just was transferred to Dallas for work on short notice and moved in with her parents temporarily, so she doesn't even pay rent or utilities currently.
I confronted her at brunch, in front of three other folks I don't know well no less. I tried not to sound preachy or lecture her to death, but I flatly told her that she was wasting a huge opportunity to save a ton of money and that she would totally regret blowing 100% of her income once she actually had bills to pay, much less if she ever had kids or a mortgage or other bigger expenses. I told her that lots of people - women especially - give and give their money away because they want to look/feel financially secure when really they are sticking their head in the sand and know they are mismanaging things. It's no different than shopaholics who spend so they can feel wealthy even as their debt mounts.
She kept trying to turn the conversation back to her income - she just needs to make more, her income is tough to project because she's commission based, she'll always have to earn more and more, she works her ass off...I brushed off her excuses with zero sympathy and insisted that she could live well Uptown on her base salary of $50K, especially since she wasn't even paying rent! She conceded that she should be saving half her income, and she eagerly accepted my suggestion that at the very least she should pay herself a rent check on the first of each month until she got her own place.
I heard the familiar refrain: "You're so right! Will you help me?"
How to Help These Friends
I never know how to help my friends when these conversations come up - and they frequently do. They listen to my lectures and agree with me and ultimately ask eagerly for my help. I'm debating writing a short simple outline or article for these friends, a sort of Financial Planning Basics or Getting Started Guide.
How do you approach friends who don't have their finances together, especially if/when they ask for your input?
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